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Inflation shock puts pressure on ECB January’s inflation data support our view that the ECB will soon forecast inflation to be at its target over the medium term. Accordingly, we think that policymakers will end net asset purchases completely this year …
2nd February 2022
Net lending defies Omicron fears in December A marked jump in lending to standing property resulted in total net lending reaching its highest level in just over 18 months in December. Although this is encouraging, several challenges remain during the …
1st February 2022
Spare capacity dwindling The euro-zone unemployment rate fell yet again in December, to just 7.0%, capping off a remarkable year for the region’s labour market. Most of the spare capacity that built up during the pandemic now seems to have disappeared, …
Banks supporting the recovery The Q4 ECB Bank Lending Survey suggests that banks are contributing positively to the region’s economic recovery. It also suggests that, while house prices are rising rapidly, risks to financial stability are mounting much …
Omicron didn’t put a big dent in household borrowing The decent rise in consumer credit in December suggests that, although consumers exercised a touch more caution as Omicron COVID-19 cases surged at the end of last year, the economy didn’t collapse. …
Housing activity to remain buoyant despite supply challenges The tick up in mortgage approvals in December suggested that the dip in housing market activity expected after the stamp duty holiday has already come and gone, and that transactions will stay …
Supply disruptions continue to ease but price pressures mount The strong 0.9% q/q expansion of Czech GDP in Q4 is consistent with data showing a recovery in industry and we think this is likely to continue this year. Meanwhile, more timely manufacturing …
Strong industrial activity to offset services softness The continued resilience of the manufacturing PMIs in Switzerland and Sweden in January indicates that industry will have supported activity through a restrictions-driven soft patch for services in …
House prices continue to surpass expectations There was no cooling in the housing market at the turn of the year, as the Nationwide house price index recorded its largest January increase for 17 years. We suspect that prices will continue to surpass …
Higher-than-expected inflation will give ECB pause for thought The smaller-than-anticipated fall in Germany’s inflation rate, and increase in core inflation in Portugal and Spain, suggest that underlying price pressures are continuing to build. Euro-zone …
31st January 2022
Weak end to 2021 but Omicron hit set to be short-lived The small increase in euro-zone GDP in Q4 came as no surprise given the country-level data published last week and shows that the euro-zone economy was struggling at the end of last year. But …
Figures consistent with a strong rebound in Q4 The larger-than-expected 5.7% increase in Polish GDP over 2021 as a whole is consistent with another large expansion in Q4 and meant that the economy recovered faster than most other European economies from …
Supply-shortages continuing to bite The EC Economic Sentiment Indicator weakened in January as the Omicron wave took a toll on economic activity, particularly in the services sector. The survey also showed that supply shortages remained acute and …
28th January 2022
Sentiment holds up well at the start of the year The EC’s Economic Sentiment Indicators for January generally showed sentiment in Central and Eastern Europe holding up across all sectors of the economy. With Omicron waves likely to peak in the coming …
Weak end to last year but better start to 2022 The decline in economic activity at the end of last year left GDP well below its pre-pandemic level and much weaker than in other major advanced economies. Activity seems to have stabilised in January so …
Stronger than expected Both the French and Spanish economies ended 2021 on a strong note, but for different reasons. In France, domestic demand pushed output above its pre-virus level, a boon for President Macron ahead of April’s election. By contrast, a …
Omicron deals a blow to office and retail demand, while industrial surges The spread of the Omicron variant took some of the steam out of the property recovery in Q4 2021, but the latest RICS results are consistent with further growth in 2022. They also …
27th January 2022
Economy stabilising The increase in the Ifo Business Climate Index (BCI) in January provides more evidence that, after contracting in late 2021, conditions have stabilised at the start of the year. With disruption from the Omicron wave likely to ease in …
25th January 2022
Inflation a headache, but Chancellor still has wiggle room Stronger tax revenues were just enough to offset big rises in debt interest costs in December. But we don’t expect this to last: further rises in inflation will mean borrowing soon overshoots the …
Omicron hangover to be short-lived, signs of shortages easing The third consecutive decline in the composite PMI indicates that the Omicron variant weighed further on activity in January. But the recent fall in COVID-19 cases, relaxation of restrictions …
24th January 2022
Sluggish January, but outlook improving The small decline in the Composite PMI in January confirms that Omicron has taken a toll on the services sector, though Germany performed surprisingly well. We think governments will ease restrictions sufficiently …
Consumer confidence proving to be resilient January’s broadly unchanged reading for consumer confidence suggests that household spending might be holding up fairly well, despite a surge in Covid cases. We expect consumption to recover quickly once the …
21st January 2022
Huge fall points to bigger Omicron hit The fall in retail sales volumes in December was bigger than expected and supports our view that the Omicron outbreak in the run-up to Christmas may have dragged down GDP by 0.5% m/m, if not more. The 3.7% m/m fall …
Core inflation to remain high Euro-zone inflation is likely to have peaked at 5% in December, with energy inflation set to fall sharply this year. But we think that core inflation will settle at around 2%, prompting the ECB to prepare the ground for …
20th January 2022
German inflation to remain uncomfortably high Final inflation data for December showed that the decline in Germany’s HICP inflation rate to 5.7% was due to energy and services. We expect both headline and core inflation to fall this year, but only to …
19th January 2022
Target-busting inflation heading to 7% After rising from 5.1% in November to 5.4% in December, CPI inflation is now further above the Bank of England’s target than at any point since the UK first adopted an inflation target in October 1992. (See Chart 1.) …
Coping with furlough and Omicron, but real wages will fall further The labour market appears to have tightened after the end of the furlough scheme and at the start of the Omicron wave. So even though real wages are now falling and will decline further, …
18th January 2022
Disappointing recovery Provisional data showing that Germany’s GDP increased by 2.7% last year and news that it shrank in Q4 underlines that its recovery has lagged many of its peers, including the US, France and the UK. We think that German GDP will …
14th January 2022
More ammunition for the Riksbank’s hawks The increase in Swedish CPIF inflation in December will embolden the hawks at the Riksbank. While we expect energy effects will drop out this year, continued supply-chain problems and rising inflation expectations …
Omicron may drag GDP back below its pre-pandemic level Although the effects of the Omicron COVID-19 wave will probably mean that the economy falls back below its pre-pandemic peak by January after having surpassed it for the first time in November, that …
Credit availability to remain good, but mortgage rates to rise The Q4 credit conditions survey suggests that, while credit conditions will remain loose, scope for lenders to absorb further increases in interest rates into their margins has run out. A …
13th January 2022
Inflation stabilises, but rate hike cycle not over yet Russian inflation held steady at 8.4% y/y in December, but we think it will rise a bit further this month and prompt the central bank to deliver a final 75bp rate hike, to 9.25%, at its meeting next …
12th January 2022
Rise in industrial output won’t prevent a poor Q4 November’s 2.3% monthly increase in euro-zone industrial production followed a big downward revision to October’s figures and was largely due to huge volatility in Ireland. The big picture is that industry …
Labour force back to pre-pandemic size Unemployment in the euro-zone fell again in November, and timelier data suggest that there have been further improvements since then. While there has been less of a hit to the workforce in the euro-zone than in the …
10th January 2022
More ammunition for Norges Bank to press on with rate hikes While Norwegian policymakers do not have as laser-like a focus on consumer price inflation as most, the increase in the core rate in Norway in December only lends support to our hawkish view that …
Service sector becoming a drag on growth The EC Economic Sentiment Indicator decreased markedly in December, as the surge in Covid cases and tightening of restrictions took their toll on activity in the services sector. The survey also showed that …
7th January 2022
Industrial sentiment stabilises but restrictions weigh on services sector The EC’s Economic Sentiment Indicators for December showed that the Eastern European economies rebounded last month as Delta virus waves abated, but Central Europe saw further …
PMI dips as Omicron and supply constraints take hold The construction PMI declined last month to end the year on a negative note, more than erasing the gain made in November. Despite tentative signs that they are starting to ease, we expect labour and …
Inflation unlikely to fall to 2% until end of 2022 After reaching 5.0% in December, headline euro-zone inflation should fall this year as the energy component plummets. But we think that core inflation will remain around 2%. The increase in headline …
2021 price rise strongest for at least 15 years Another substantial rise in the Halifax house price index in December ensured that the lender agreed with Nationwide that the rise in house prices over the 2021 calendar year was the strongest for at least …
Stalling manufacturing raises chance of recession The unexpected decline in German industrial production in November increases the chance that GDP fell in the last quarter of 2021. And with the Omicron variant likely to hit Germany hard in the coming …
Inflation will fall further in 2022 Germany’s HICP inflation rate fell to 5.7% in December and is now past its peak, but the national CPI measure, which is arguably a better indicator at the moment, rose slightly. Looking ahead, we expect Germany’s …
6th January 2022
Weak growth and intense price pressures going into 2022 The final Composite PMIs for December confirm that the euro-zone economy ended 2021 on a weak note, consistent with our view that GDP rose by only about 0.2% q/q in Q4. They also suggest that price …
5th January 2022
Stabilisation in approvals consistent with robust demand Mortgage approvals stabilised in November, consistent with other evidence that demand remained robust after the stamp duty holiday ended. Even though approvals have softened to a similar level to …
4th January 2022
Net lending reverses course as uncertainty grows Declines in lending for both standing property and new developments resulted in total net lending moving back into negative territory in November. The outlook is for credit conditions to remain tight in the …
November’s strength unlikely to have lasted The healthy rise in consumer credit in November adds to evidence that economic activity strengthened in the middle of Q4. But that feels like a distant memory now. Against a backdrop of surging COVID-19 cases, …
Less momentum going into Q4 Today’s release indicates the economy had a bit less momentum in Q3 than we had previously thought. And, with early signs the Omicron variant has hit activity, growth is sure to have slowed further in Q4. Upward revisions to …
22nd December 2021
Festive spirit in short supply December’s decline in consumer confidence adds to the list of deteriorating consumer indicators. We expect household spending to contribute to a marked slowdown in GDP growth in Q4 to just 0.2% q/q. Data released this …
21st December 2021
Riksbank looking increasingly behind the curve The resilience of the ETI in December underlines that the Swedish economy is comparatively well-placed going into 2022. All told, the pressure on the Riksbank to soften its so-far dovish stance is building. …
Borrowing overshoot could continue in the coming months The rise in government borrowing in November suggests the public finances could be already starting to feel the strain from higher spending on NHS Test & Trace and booster vaccines. Now that tighter …
